Secondary employment is the best kind of asset protection
Today we discuss how sidelobes contribute to generating an additional income stream, diversifying your portfolio and even scratching the itch of speculation! All this serves as sound asset protection.
Purpose of the asset protection
Excessive time is devoted to wealth protection on doctor-finance blogs. Are discussions about disability insurance, life insurance and roof insurance important? Yes.
However, with the frequency with which the topic is treated, one should think that these catastrophic events must happen always and everywhere! That’s not the case.
The reason why they are covered so often is that life events such as permanent disability or loss of life can be devastating for you and your family. But these products are not the only way to protect your assets.
An additional source of income
Your biggest asset in your young career is your human capital or earning potential. For this reason, we should secure this income potential by taking out occupational disability insurance.
While we are young and healthy, it is also our job to save this retirement capital. Remember that we are preparing to retire because at some point we expect A) to stop working and / or B) to drain our current income streams.
Retirement accounts serve as a source of income. The runners do the same! If you have side-coughs – and not the income of them to live – this forms another layer of protection to secure your income when you need it.
Like the wings of birds, side-lobes minimize the risks we face every day in life by giving us a buffer should we lose our job. You can also help us to retire earlier.
Examples of sideline jobs include medical expert work, writing a book, real estate investment or even writing a blog. All of these income-generating measures can help to generate income if it ever comes to a loss of jobs. The more passive they are, the more they can be considered as additional disability insurance if they can no longer work.
Diversification is crucial
Do you know the saying, “A bird in your hand is better than two on the roof?” The idea is that a given guarantee is better than two options that may not work. Another way to deal with opportunities that do not work is to have as many of them as possible.
While some ideas fail, others will fly. This is called diversification – and side thrusts are perhaps one of the best, but I’m always one step ahead of myself.
When we invest in 101, we learn that diversification is the key to our success. As an example of the importance of diversification, we should put ourselves in the position of someone else. Let’s say you were an Enron employee in their golden days. As an employee, they have given you the opportunity to invest all your retirement money in Enron shares. Given his success story, you just could not see how that could be a bad idea. They are on the rise.
Well, we all know how that story ended. If you were this employee, you would have lost your entire pension portfolio. The reason? They were not diversified. You took all your eggs and put them in a basket. Not diversifying is a personal financial sin.
What is the opposite of it? Invest in a well-diversified portfolio so that when one part of the market zips, the other part of your portfolio splits. An example would be investments in large cap, mid cap, small cap, international equities, real estate, government bonds and TIPS.
However, one form of diversification, over which many locations talk much less time, is secondary stress. If you make money through an ancillary business, it will almost certainly work independently of the stock market – unless it is a form of income tied to market success.
Some speculations are good
For anyone who has consistently read this page, you know how antispeculative I am. I think it is unintelligent to take an unmitigated risk. Just take care of the 20% you need to know to get 80% of the results.
Some say you can diversify your portfolio with only 20-25 individual stocks. While I understand the premise (and math here), I see this as pure consideration in those 20-25 individual stocks. And I do not think it’s wise.
What happens if one of these 20 stocks (or 5% of your portfolio) goes bankrupt? How protected would you be then? And why take this risk when you can easily take the market return and that’s enough?
It might then surprise you to learn that I support a form of speculation that speculates on itself. The only risk is the amount of time and money you spend on something and your ability to get a good return on your investment.
I think that it will serve you well to speculate on a side for which you are passionate enough and which has the potential to generate additional income. Of course, the more pans you have in the fire, the more likely it is to catch them.
So, do not just diversify your portfolio. Diversify your side shoots as well.
Taking it here is easy: Side Hustles can definitely serve as an additional source of income, as a form of diversification and as asset protection. It is worth considering at least these options.
The other undeniable added value is, of course, that if one of your rivals becomes wildly successful, you will have many interesting opportunities in the near future. How much should I work in my home business? Do I need less to retire? Am I happier or my main task?
All these questions would be a good problem, but you have to first have a side blow!
Keep it up. You know that I will.